Bitcoin’s transformation from risk asset to digital gold hints at new all-time highs
On July 26, Bitcoin (BTC) rose 6% as it flirted with the $68,000 resistance level. Interestingly, this move coincided with increased buying pressure on US Treasuries, with the US 5-year yield falling to its lowest level since March 2024. Similarly, gold, the world's largest reserve asset, rose 1.4% on July 26 to near $2,400. Make a mark.
Bitcoin's gains may seem unlikely as investors' appetite for fixed income securities and gold increases, but the answer lies in the performance of tech stocks and the real estate market.
A sluggish stock market rally and weak real estate data fuel bitcoin prices
Demand for US Treasuries was partly driven by the fact that the US personal consumption expenditure (PCE) price index rose 2.5% in May from a year earlier, in line with analysts' expectations. According to the report released on July 26, personal income increased by 0.2% from the previous month, which is below the market expectation of 0.4%. In short, the data favored an interest rate cut by the US Federal Reserve (Fed).
A shift to less restrictive monetary policy typically hurts fixed incomes and gold, but the opposite happened on July 26. Investors fear the stock market is poised for a correction, making alternative assets like Bitcoin more attractive. Additionally, there is growing concern about poor real estate market data as high borrowing costs discourage sellers from listing their properties.
Morgan Stanley Chief Investment Officer Mike Wilson told Yahoo Finance on July 26 that “cracks” in the bull thesis of “artificial intelligence optimism” and “slowing economic growth” will lead to a 10% correction for the S&P 500 in the third quarter. . Wilson added that the government is spending too much on fiscal policy to “keep things moving along,” creating an unfavorable backdrop for stocks.
Tech led the latest market decline, partly due to the US government's plans to ban exports of technologies critical to the development of artificial intelligence and partly due to profit-taking as the tech sector outperformed the S&P 500 in two months. According to Yahoo Finance, Keith Lerner, co-chief investment officer at the trust, has been doing well since 2002.
In the real estate market, the number of unsold new homes in the American South reached an 18-year high, driven by Florida and Texas. 293,000 newly constructed homes went on sale in South America in June, surpassing the August 2006 peak of 291,000. Ryan Marshall, CEO of Pulte Group, told Yahoo Finance.
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Investors are beginning to support Bitcoin's ‘digital gold' thesis
Perhaps the main factor in the increase in the speed of Bitcoin is the recent buying activity from pension funds, even as the market part expects a correction in the stock market index.
In May, details emerged of a $164 million investment in Bitcoin exchange-traded funds (ETFs) by the state of Wisconsin's Board of Investments. On July 25, Jersey City Mayor Steven Fulop announced that the city's pension fund plans to invest in Bitcoin ETFs. Additionally, on July 26, a U.S. Securities and Exchange Commission filing revealed that the Michigan State Retirement System held $6.6 million in a Bitcoin ETF.
Basically, the perception of Bitcoin is slowly changing from a risk asset, which negatively affects real estate and stock markets during economic downturns, to something akin to gold – an alternative hedge against an ever-growing money supply and unsustainability. Fiscal government debt.
While there is no guarantee that Bitcoin will break above its current all-time high of $73,757 in 2024, the odds are increasingly favorable.
This article does not contain investment advice or recommendations. Every investment and business activity involves risk, and readers should do their own research when making a decision.
